Fairbanks Daily News-Miner

Fairbanks voters slashed the city’s rate of property tax and simultaneously grabbed the ability to approve a sales tax, leaving the city facing an estimated $13 million budget gap just weeks before the review of next year’s budget is set to begin.

By passing propsotions 3 and 4, voters have also sent the city scrambling to find a new source of revenue big enough to cover almost half its annual budget, said city Mayor Steve Thompson.

“There’s a lot of work to be done in the next few weeks,” Thompson said. “I’m disappointed.”

The Fairbanks City Council typically approves its budget by mid-December.

Proposition 3, which aimed to basically eliminate the city’s property taxes by capping the tax rate at 0.5 mills, drew 56 percent of the vote Tuesday with 13 out of 14 precincts reporting.

Proposition 4 garnered 61 percent of the vote and put the power to approve a sales tax in the hands of voters, stripping that power from the six-member Fairbanks City Council. Since Proposition 4 only allows voters to consider a sales tax at a general election, the soonest voters could consider one is next October, city officials have noted.

Absentee ballots, which will be counted next week, are extremely unlikely to change the results.

The potential that both propositions could pass had caused concern among city officials.

On Tuesday, they watched the city’s ability to collect property taxes—the source of almost half the city’s annual budget—evaporate on the same night that the Fairbanks City Council lost the ability to approve a sales tax, the easiest mechanism to replace property taxes, on its own.

Joint passage of the two propositions leaves the city with a huge financial question mark as it prepares next year’s budget, a document the City Council will consider in the coming weeks.

Thompson suggested the city and the council might consider alternative taxes like an employment head tax or a tax on gross receipts, but said it’s too early to identify a solution.

Proposition 3 sponsor Nelson Miles applauded the results of his initiative. He suggested the elimination of the city’s property taxes will encourage more borough residents to start to move inside the city limits over the next few years.

“It’s just a positive thing for the people in the city,” Miles said.

Chad Roberts, who was elected to a three-year council seat Tuesday, was more subdued and worried the passage of both propositions could lead to severe budget cuts. Roberts, however, hopes a solution can be reached that avoids major cuts.

“People don’t want to have a city in disrepair,” Roberts said.

Vivian Stiver, who was also elected to a three-year council seat, campaigned heavily against the idea of a sales tax and said Tuesday’s election results failed to change her mind.

“Voters have said no to a sales tax,” she said, and the City Council needs to find another option, Stiver said.

The measures—both voter initiatives—led to visible campaigns from citizen groups in the weeks prior to Tuesday’s election.

The specter of a fiscal crisis failed to stop supporters of Proposition 3, the anti-property-tax measure, from mounting a visible campaign.

Miles said his group, called the City of Fairbanks for Property Tax Reform Committee, blanketed the city with an estimated 23,000 campaign flyers in the weeks before election day.

Momentum had already been built this summer, Miles said, as he walked door-to-door collecting signatures in the effort to place the measure on the ballot.

“People felt property taxes were too high, and that’s what kept me going all summer,” Miles said.

In response, another group opposed to the idea of abolishing property taxes spent over $5,000 on television ads asking voters to toss Proposition 3 and to approve proposition 4, according to reports filed with the state of Alaska.

The group, the Good Sense Committee, has organized a handful of times in recent years against various proposed sales taxes.

This year’s campaign was difficult, said contributor and Fairbanks City Councilman Jerry Cleworth, because Proposition 3 failed to mention the words “sales tax” despite its organizers admitted aim of forcing the City Council to institute one to replace property taxes.

While his group wanted to identify the downside of a sales taxes, its ads could only imply that a sales tax would result if Proposition 3 passed, Cleworth said, noting that the word’s “sales tax” did not appear anywhere in the proposition’s language.

“The average person might not have seen it as a sales tax,” Cleworth said. “What you’ve got on the ballot (only mentioned) getting rid of property taxes.”